VACostCutting

Thursday, April 13, 2006

Indiana Toll Road Deal Heads to Court

Back in February, Geoff Segal had this post about Indiana's effort to generate billions of dollars in new money by leasing the Indiana Toll Road to a private company.

Well, it seems some people really don't like that idea. And they've taken their fight to court:

Opponents argued it violates the state constitution and have sued. They said the constitution requires that the proceeds from the sale of any public works be used to pay off state debt. The Daniels administration said the arrangement is not a sale but a lease.

The state hopes to close the deal and transfer the highway to the consortium by June 30.

The lease authorization passed in the Republican-controlled General Assembly by the bare minimum of votes. All but two Democrats opposed it, saying the state should not turn over a major asset to a private, foreign entity, and noting the consortium would reap billions of dollars through toll revenue and rate increases.

So the state should not accept nearly $4 billion dollars and save on maintenance costs associated with a depreciating asset because some believe a private entity might try to turn a profit on the deal.

The business acumen of some politicians is staggering.

3 Comments:

  • Why can't the government keep the maintenance and turn the same profit? Is it that they can't charge tolls?

    By Blogger Lucy Jones, at 4/14/2006 12:04 PM  

  • I think this is already a toll road. Why the government cannot turn a profit on the road is a very good question -- but the first answer that comes to mind is that they aren't charging enough.

    The downside risk for a private company is if it sets tolls at a level sufficient to cover expenses, and then watches traffic plummet.

    But they would not take the risk (presumably), unless they were fairly certain that over the life of the lease, they could recover their investment and more.

    By Blogger Norman, at 4/14/2006 7:50 PM  

  • Yes, it already is a toll road. In theory there is nothing that is preventing the state from turning a profit, however (and perhaps this is my bias), the state or government doesn't do many things well...especially operate or function like a profit seeking business. The incentives aren't there to do so.

    The private company also assumes that they can operate the road for significantly less than the state can.

    By Blogger gfsegal, at 4/14/2006 9:24 PM  

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